Salvatore Emma, Jr., President and CEO, commented, "In the quarter, we reported a 25.6% increase in net sales of automotive and molded medical components, as well as a 19.7% increase in sensors' sales volume. However, our operating results were adversely impacted by a measurable drop in the average market price of silver, production delays and the fact that the comparable prior-year quarter benefitted from a $250,000 final sale of Predictor licenses, which dropped directly to gross profit."

Mr. Emma added, "We also invested aggressively in quality, manufacturing systems and process improvements in the quarter and are very encouraged by the progress we are making year over year. As we ramped up for higher demand of orthopedic implant components, we encountered production delays. These challenges have been addressed and production volume improved measurably in the latter part of March. We expect that the investments we are making in manufacturing capacity and talented people will enable us to take full advantage of increased demand for our contract manufacturing services."

First Quarter 2015 Review

Net sales for the first quarter of 2015 were $5.9 million compared with $6.0 million in the prior-year period. Increased net sales of custom thermoplastic injection molded products and 6.8% higher net sales of sensors nearly offset the 29.7% lower net sales in orthopedic implant components. Despite higher sensor volume, the silver surcharge billed was lower due to a 17.8% decline in the average price of silver over the prior-year period. Shipments of orthopedic implant components were delayed due to previously noted production challenges. The prior-year first quarter benefitted from $250 thousand in sales of Predictor licenses.

$ In thousands

Q1 2015

Q1 2014

$ Change

% Change

Gross Profit

$ 796

$ 1,311

$ (515)

(39.3%)

Gross Margin

13.6%

21.7%

Total net income

$ 108

$ 257

$ (149)

(57.9%)

Diluted earnings per share

$ 0.04

$ 0.09

$ (0.05)

(55.6%)

The first quarter decline in gross profit was primarily the result of a 13.2 point decrease in gross margin related to the contract manufacturing of orthopedic implant components. Gross margin was impacted adversely by increased overtime and production delays during a period of increased demand of orthopedic implant components. Additionally, investments in our quality function to support the Company's growth strategy resulted in an increase of $116 thousand when compared with the prior-year period.

Selling and marketing expenses were $258 thousand, or 4.4% of net sales, in the first quarter of 2015, compared with $292 thousand, or 4.8% of net sales, in the 2014 first quarter. Travel expenses declined $21 thousand due to less international travel and trade show attendance during the period.

First quarter 2015 general and administrative expenses were $648 thousand, or 11.1% of net sales, compared with $595 thousand, or 9.9% of net sales, in the prior-year period. The increase reflects higher wages, taxes and benefits of $18 thousand due to annual merit increases, an increase in accounting fees and other related costs of $17 thousand and the engagement of an investor relations firm in the second quarter of 2014.

Research and development expenses for the first quarter of 2015 were $93 thousand, or 1.6% of net sales, compared with $97 thousand, or 1.6% of net sales, in the prior-year period.

Consolidated net income was $108 thousand, or $0.04 per diluted share, in the first quarter of 2015, down from $257 thousand, or $0.09 per diluted share, in the same period in 2014. Net income in the 2015 first quarter reflects income from discontinued operations of $363 thousand as the Company's subsidiary, RMDDxUSA, was formally discharged in its bankruptcy proceedings. This was due to the write off of the remaining liabilities of $320 thousand and the reversal of accumulated other comprehensive income of $43 thousand from cumulative translation adjustments from RMDDx Corporation.

Net loss from continuing operations of $255 thousand for the first quarter of 2015 was due to previously noted production issues in the orthopedic implant components product line.

Adjusted EBITDA (1) (income from continuing operations adjusted for income taxes, other income and expense, interest, depreciation and amortization, and share-based compensation expense) for the first quarter of 2015 was $160 thousand, or 2.7% of net sales, compared with $724 thousand, or 12.0% of net sales, for the same period of the prior year. (1)See attached table for additional important disclosures regarding the Company's use of Adjusted EBITDA, as well as a reconciliation of net income (loss) from continuing operations to Adjusted EBITDA.

Cash flow and financial resources

At March 31, 2015, the Company had cash on hand of $391 thousand and working capital of $1.4 million. For the first quarter of 2015, the Company generated net cash from operating activities of continuing operations of $275 thousand and used net cash of $242 thousand for capital expenditures.

On May 5, 2015, the Company received a commitment letter from its bank to extend the existing revolving credit facility for an additional two-year period expiring on June 30, 2017 and to extend a new equipment line of credit of $1.0 million commencing June 26, 2015 under the same terms as the original equipment line. The Company believes that cash flow from its operations, together with its existing working capital, the revolving line of credit and other resources, will be sufficient to fund operations at current levels and repay debt obligations over the next twelve months.

Strategy and outlook

Mr. Emma concluded, "The Company is well positioned to capitalize on anticipated demand growth for our contract manufacturing services. While we continue to seek avenues to diversify our product mix and expand our customer base, we continue to believe that contract manufacturing of medical devices and components will be a primary driver of future revenue and margin growth."

About Arrhythmia Research Technology, Inc.

Arrhythmia Research Technology, Inc., through its wholly-owned subsidiary, Micron Products, Inc., is a diversified contract manufacturing organization that produces highly-engineered, innovative medical device technologies requiring precision machining and injection molding. The Company also manufactures components, devices and equipment for military, law enforcement, industrial and automotive applications. In addition, the Company is a market leader in the production and sale of silver/silver chloride coated and conductive resin sensors used as consumable component parts in the manufacture of integrated disposable electrophysiological sensors. The Company's strategy for growth is to build a best-in-class quality organization and capitalize on its engineering design expertise and reliable, proprietary manufacturing processes to further penetrate the medical device contract manufacturing market.

The Company routinely posts news and other important information on its websites:

Forward-looking statements made herein are based on current expectations of Arrhythmia Research Technology, Inc. ("our" or the "Company") that involve a number of risks and uncertainties and should not be considered as guarantees of future performance. The factors that could cause actual results to differ materially include our ability to retain order volumes from customers who represent significant proportions of net sales; our ability to maintain our pricing model, offset higher costs with price increases and/or decrease our cost of sales; variability of customer delivery requirements; the level of sales of higher margin products and services; our ability to renew our credit facility and manage our level of debt and provisions in the debt agreements which could make the Company sensitive to the effects of economic downturns and limit our ability to react to changes in the economy or our industry; failure to comply with financial and other covenants in our credit facility; volatility in commodity and energy prices and our ability to offset higher costs with price increases; continued availability of supplies or materials used in manufacturing at competitive prices; variability of customer delivery requirements; variations in the mix of products sold; and the amount and timing of investments in capital equipment, sales and marketing, engineering and information technology resources. More information about factors that potentially could affect the Company's financial results is included in the Company's filings with the Securities and Exchange Commission.

FINANCIAL TABLES FOLLOW.

ARRHYTHMIA RESEARCH TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

Three months ended March 31,

2015

2014

Net sales

$ 5,858,342

$ 6,029,843

Cost of sales

5,061,946

4,718,557

Gross profit

796,396

1,311,286

Selling and marketing

257,972

291,672

General and administrative

648,227

594,631

Research and development

92,561

96,827

Total operating expenses

998,760

983,130

Income (loss) from continuing operations

(202,364)

328,156

Other income (expense):

Interest expense

(65,693)

(70,149)

Other income (expense), net

13,509

2,312

Total other expense, net

(52,184)

(67,837)

Income (loss) from continuing operations before income taxes

(254,548)

260,319

Income tax provision

—

1,177

Net income (loss) from continuing operations

(254,548)

259,142

Discontinued Operations:

Income (loss) from discontinued operations, net of tax provision of $0 for the three months ended March 31, 2015 and 2014

362,610

(2,425)

Net income

$ 108,062

$ 256,717

Income (loss) per share - basic

Continuing operations

$ (0.09)

$ 0.09

Discontinued operations

0.13

—

Income per share - basic

$ 0.04

$ 0.09

Income (loss) per share - diluted

Continuing operations

$ (0.09)

$ 0.09

Discontinued operations

0.13

—

Income per share - diluted

$ 0.04

$ 0.09

Weighted average common shares outstanding - basic

2,778,935

2,722,239

Weighted average common shares outstanding - diluted

2,877,599

2,777,739

ARRHYTHMIA RESEARCH TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

March 31, 2015

December 31, 2014

Assets

Current assets:

Cash and cash equivalents

$ 391,382

$ 209,398

Trade accounts receivable, net of allowance for doubtful accounts of $48,000 at March 31, 2015 and $45,000 at December 31, 2014

Less: cash and cash equivalents of discontinued operations at end of period

—

—

Cash and cash equivalents of continuing operations at end of period

$ 391,382

$ 297,248

ARRHYTHMIA RESEARCH TECHNOLOGY, INC.

ADJUSTED EBITDA RECONCILIATION

(Unaudited, $ in thousands)

Three Months Ended

March 31,

2015

2014

Net income (loss) from continuing operations

$ (255)

$ 259

Income tax provision

--

1

Other income/expense

(14)

(2)

Interest expense

66

70

Depreciation and amortization

356

385

Share-based compensation

7

11

Adjusted EBITDA

$ 160

$ 724

Adjusted EBITDA margin %

2.7%

12.0%

(1) Non-GAAP Financial Measures

In addition to reporting net income, a U.S. generally accepted accounting principle ("GAAP") measure, this news release contains information about Adjusted EBITDA (income from continuing operations adjusted for income taxes, other income and expense, interest, depreciation and amortization, and share-based compensation expense), which is a non-GAAP measure. The Company believes Adjusted EBITDA allows investors to view its performance in a manner similar to the methods used by management and provides additional insight into its operating results. Adjusted EBITDA is not calculated through the application of GAAP. Accordingly, it should not be considered as a substitute for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.